Retirees resisting the urge to splurge
Despite new rules offering over-55s open access to their pensions, most retirees are resisting the urge to splurge.
According to research from Prudential, fewer than one in 10 overspent, or expects to overspend, in their first year of retirement.
Most people are trying to strike the right balance between rewarding themselves for years of work with making sure their savings last. So, although 22% planned to take a luxury holiday and 16% purchased a new car, the most popular option, at 34%, was not to make any major purchases when they first retire.
However, while many retirees are being realistic about their finances and what their money needs to achieve, the survey did reveal some worrying trends.
Just one in three retirees used a budget to control their expenditure, while 13% said they found it harder than they expected to live on their retirement income. Of those that took money out of their pension during their first year of retirement, 68% did not seek professional advice.
Vince Smith-Hughes, retirement expert at Prudential says: “It would appear that many post-freedoms retirees have heeded the warnings about potentially running out of money in later life and are foregoing extravagant purchases when they first retire.”
“However, even those who are taking a more cautious approach could be risking their income later in retirement with the initial choices they make. The pension freedoms have opened up a whole new set of possibilities for retirees, but for many people hoping to make the most of the new flexibility while also ensuring they don’t outlive their savings, the help of a professional financial adviser can be very important.”
A financial adviser who is not tied to any financial services company (such as a bank or insurance company) and is authorised by the Financial Services Authority (FSA). They can advise on financial products to suit your circumstances. All IFAs have to give consumers the choice of paying by fees or commission and have to explain which would best suit the customer in that particular instance. Also, if commission is paid either by the client or the financial service provider recommended by the IFA, the IFA must disclose what that commission is.